Stock Chartist

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March 21st, 2011

At the beginning of March, a reader alerted me to the following which was written by John Melloy, the Executive Producer of CNBC’s Fast Money show that precedes Cramer. Excerpts from the piece follow:

What happens when a bull market rising meets a bad moon rising? We’ll find out this month.

On March 19th, a full moon will occur at around the same time it reaches it’s closest point to earth in recent history. Rare planetary events such as this are often associated with above normal tides, an increase in volcanic activity and more frequent earthquakes, according to astronomers and yes…even some market analysts……

Before dismissing this as voodoo outright, keep in mind that Montgomery [Paul Macrae Montgomery, publisher of the interesting and thorough Universal Economics newsletter], a successful market analyst for 40 years, only watches the lunar cycle as a very small piece of a more sophisticated overall market evaluation in his newsletter…..

Like many strategists Montgomery has been warning clients that this unusually long period of volatility could mean a stock market correction is overdue. He just differs from the rest because he is citing an astronomical anomaly as just one more — albeit small – reason to get cautious.

……one should still note that this won’t be just any ordinary full moon. This month it will occur when the distance between the moon and the earth will narrow to just 356,580 kilometers…….

Such events “have passed before with nothing of consequence, but we would be wise to be prepared for something untoward happening,” said analyst and hedge fund manager Dennis Gartman……..

The market’s current selloff, which intensified on Tuesday after oil prices rose, began after the S&P 500 hit a high on February 18th, the same day of a full moon it jus so happens. It also was within 23 hours of the moon’s perigee for February, points out Montgomery.

That event “could have been enough to cause a minor top in stocks, and to affect the geophysical record as well,” wrote Montgomery on Monday. In that same note, he pointed out extreme insider selling as another reason to be cautious and get “flat” here.

Was the full moon on the same day of the market’s 2011 high a coincidence? Maybe. Just don’t be surprised to see more telescopes down on Wall Street.

We know the moon had nothing to do with the Japanese earthquake and related tsunami. What we don’t know is whether the approaching special full moon this past Saturday had anything to making the reaction worse (the market declined 3.18% during this lunar phase which ended with Saturday’s extra large full moon).

It’s easy for the media to take a common biweekly occurrence such as a full moon and turn it into something “newsworthy”. But I just haven’t heard or read anyone in media announcing the possibility of a respite in the market correction due to the moon entering a waning phase (the period preceding a new moon), one that has historically tended to be favorable to stock prices. Now let’s see what happens (click on image to enlarge).

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